News Corporation

Reach for the Sky

Why News Corporation wants to buy the satellite broadcaster

STARTING a long courtship, on June 15th News Corporation made a non-binding offer to acquire BSkyB, a satellite broadcaster. Sky's share price shot up. News Corporation's investors seemed pleased, too. After ruinous forays into the internet and newspapers in the shape of MySpace and the Wall Street Journal, they are probably relieved to see the firm invest in pay-TV, at which it is rather good.

News Corporation already holds a controlling 39% stake in Sky, which grew out of a business that Rupert Murdoch built in the 1980s. It has offered £7 ($10.36) a share for the rest, valuing the company at more than £12 billion. Sky's directors sniffed at that, and said they would entertain offers over £8 per share. In the meantime, though, Sky will work with News Corporation to overcome regulatory hurdles in Britain and Europe. It was not exactly a firm brush-off.

It is easy to see why News Corporation wants Sky. The British firm has proved almost recession-proof, attracting hundreds of thousands of new subscribers during the slump and extracting more money from each. It is a pioneer in 3-D and mobile television and has begun to distribute programmes through games consoles. News Corporation, which suffered a nasty drop in its American broadcast TV business and newspapers last year, could do with such a solid player on its bench.

Sky is so successful, indeed, that the chief threat it faces now comes not from competitors but from regulators and the British government. Ofcom, the media watchdog, has ordered Sky to sell some of its channels to competitors such as Virgin and BT—and set the price (the firm is appealing). The previous Labour government mooted using taxes to upgrade the broadband network. That would have opened a new route for rivals to bring pay-TV into the living room.

But the Conservatives seem less keen on fiddling with the market. The party, which was backed by the Sun, a News Corporation paper, during the general-election campaign, has also hinted at more minimalist media regulation. Jeremy Hunt, the culture secretary, responded to news of News Corporation's offer by pointing out that it already controls Sky. This one is likely to go through.